IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
STEVE JACKSON GAMES,
INCORPORATED, STEVE JACKSON,
ELIZABETH McCOY,
WALTER MILLIKEN, and
STEFFAN O'SULLIVAN
Plaintiffs, Civil Action No.
A 91 CA 346
vs .
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UNITED STATES SECRET SERVICE,
UNITED STATES OF AMERICA
WILLIAM J. COOK,
TIMOTHY M. FOLEY, BARBARA GOLDEN,
and HENRY M. KLUEPFEL,
Defendants.
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_______________________________________________________
REPLY TO PLAINTIFFS' RESPONSE AND MEMORANDUM IN
OPPOSITION TO INDIVIDUAL. DEFENDANTS' MOTION TO DISMISS
INTRODUCTION
The individual defendants in this action have moved to
dismiss plaintiffs' claims against them on the grounds that the
exercise of personal jurisdidtion over them is prohibited by the
fiduciary shield doctrine. In addition, the federal employee
defendants, namely defendants William J. Cook, Timothy M. Foley
and Barbara Golden, submit that the Supremacy Clause of the
United States Constitution also prohibits the exercise of
personal jurisdiction over them in this case.
Plaintiffs have opposed this motion, arguing that the
fiduciary shield doctrine is inapplicable and that, because their
claims are founded upon a federal question, the Supremacy Clause
is not implicated. For the reasons set forth below, as well as
in the individual defendants' motion to dismiss, plaintiffs'
arguments are without merit and their claims should be dismissed
for lack of personal jurisdiction.
ARGUMENT ­
I. The Fifth Circuit Has Unequivocally Held that the Fiduciary
Shield Doctrine Prohibits the Exercise of Personal
Jurisdiction Where an Individual's Only Relevant Contact
with a Forum Arises from Acts Performed for the Benefit of
His Employer
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In Stuart v. Spademan, 772 F.2d 1185, 1197 (5th Cir. 1985),
the Fifth Circuit considered the question of whether the contacts
of a corporation with a particular forum should be attributed to
the individual who served as president of that corporation for
the purpose of establishing personal jurisdiction over him. (l) In
deciding that question the court stated the following:
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[S]ome leading commentators observe that, 'if the
corporation is not a viable one and the individuals are
in fact conducting personal activities and using the
corporate form as a shield, a court may feel compelled
to pierce the corporate veil and permit assertion of
personal jurisdiction over the individuals.' (Citation
omitted.) Thus, the fiduciary-shield doctrine -- which
***FN 1 Plaintiffs' opposition incorrectly asserts that [t]he
Court interpreted the fiduciary shield doctrine narrowly to hold
only that personal jurisdiction over the defendant cannot be
based on contacts established by other employees of the
corporation." Opposition at 9. However, a careful reading of
Spademan reveals that the following contacts were at issue in the
case: "Spademan entered into a contract with Texas residents;
Spademan shipped bindings to the plaintiffs in Texas for
modification; Spademan, or his attorneys, and the plaintiffs
exchanged letters and telephone calls regarding the assignment of
the patent and the reissuance of the patent; the amended
agreement included a choice-of-law provision that anticipated the
application of Texas law; SRS advertised in and shipped its
products to Texas; and, finally, SRS marketed the modified
bindings in Texas. 772 F.2d at 1192. All of these activities
were undertaken either by Spademan, in his capacity as an officer
of the corporation or by attorneys representing him in that
capacity. Hence, plaintiffs' contention that the contacts of
other employees were somehow at issue is plainly erroneous.
holds that an individual's transaction of busines
within the state solely as a corporate officer does not
create personal jurisdiction over that individual
though the state has ln personal jurisdiction over the
corporation -- (footnote omitted) does not apply when
courts are willing to disregard the corporate entity,
usually on the theory that the individual or subsidiary
is the alter ego of the corporation or parent.
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The court went on to find that the corporation in question was
not the alterego of the individual defendant and accordingly
held that the fiduciary shield doctrine prohibited the exercise
of personal jurisdiction over him. (2) Id. at 1198.
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Similarly, in Saktides v. Cooper, 742 F. Supp. 382 (W. D.
Tex. 1990), U.S. District Judge James R. Nowlin, relying on the
decision in Stuart v. Spademan, specifically held that the
fiduciary shield doctrine prohibited the exercise of jurisdiction
w5here the individual defendant's only relevant contacts with the
state were "not for his own benefit but for the benefit of his
employer". Id. at 385. Judge Nowlin noted that only a minority
of courts have been willing to attribute a corporation's contacts
with a forum to an individual officer of that corporation, "on
the rationale that individual officers, as agents of the
corporation, would be personally liable to any third person they
injured by virtue of their tortious activity even if such acts
were performed within the scope of their employment as corporate
***FN 2 Plaintiffs maintain that the Supreme Court's decision in
Calder v. Jones, 465 U.S. 783 (1984), rejected the fiduciary
shield doctrine. It is clear, however, that the Fifth Circuit
does not share that view. Stuart v. Spademan was decided after
Calder and it is quite apparent that the court was aware of the
decision since it is cited in the opinion. See Stuart v.
Spademan, 772 F. 2d at 1189-90 and n. 2.
officers", id., and rejected that approach out of hand, stating
that "the issue was not whether the Defendant may be held liable
in some forum for tortious acts committed within the scope of
corporate employment, but whether he may be required to defend a
suit in this forum, if his only relevant contacts are acts
performed not for his own benefit but for the benefit of his
employer." Id. at 386. (Emphasis added.) This crucial
distinction, is, of course, grounded in the simple fact that
there is a significant difference between the circumstances which
may justify liability and those which will justify the exercise
of personal jurisdiction. Id. at 386, n. 4 . In short, whether a
plaintiff has stated a claim against a particular defendant is a
different issue than whether the court may exercise personal
jurisdiction over that defendant.
iPlaintiffs assert that federal employees, simply because
they are so employed, are not entitled to assert the fiduciary
shield doctrine as a defense. In essence, plaintiffs argue that
federal employees, unlike other individuals, must submit to
jurisdiction in far-flung locations, simply because they have
made the unfortunate decision to serve the United States rather
than a private employer. This assertion is palpably wrong. As
support for their misguided proposition, plaintiffs argue that
individual federal employees can be subject to personal liability
for constitutional violations under Bivens v. Six Unknown Named
Agents of the Federal Bureau of Narcotics, 403 U.S. 388 (1971).
While this is, of course, quite true, it provides no support for
plaintiffs' argument.
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First, as noted above, the questions of liability and
personal jurisdiction are separate and unrelated. That an
individual may be subject to liability in some forum for his
conduct has no bearing on whether the exercise of personal
jurisdiction by a particular forum is appropriate. Moreover,
while plaintiffs contend that the failure to exercise personal
jurisdiction under these circumstances would inconvenience them,
thwart the interest of the state in providing a forum and hinder
the resolution of controversies, these various "fairness factors
cannot of themselves invest the court with jurisdiction over a
nonresident when the minimum contacts analysis weighs against the
exercise of jurisdiction". Stuart v. Spademan, 772 F.2d at 1191-
92 (citing World-Wide Volkswagen Corp. v. Woodson, 441 U.S. at
286). Moreover, the Supreme Court has previously rejected the
notion that federal officers sued individually may be afforded
disparate treatment because of their federal employment. In
Stafford v. Briggs, 444 U.S. 527 (1980), the Court, in
interpreting the venue statute, 28 U.S.C. Ą 1391, stated:
If 1391(e) were construed to qovern actions for money
damages against federal officers individually, suits
could be brought against those federal officers while
in Government service - and could be pressed even after
the official has left federal service - in any one of
the 95 federal districts governing the 50 states and
other areas within federal jurisdictions. This would
place federal officers, solely by reason of their
Government service, in a very different posture in
personal damages suits from that of all other persons.
The Court went on to find that such a result would be
inconsistent with "'the sound and equitable administration of
justice.'" Id. at 545. Hence, plaintiffs' assertion that the
fiduciary shield defense is unavailable to federal employees is
without merit.
II. The Supremacy Clause Prevents the Exercise of Personal
Jurisdiction over the Federal Employee Defendants
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The plaintiffs claim that no supremacy issue is raised in
this case because "in a federal question case, personal
jurisdiction over the defendant is determined by federal, not
state law." Opposition at 11. This argument proves too much.
Although plaintiffs are correct that in a federal question case,
if there is no federal statute governing service of process the
state long-arm provision is borrowed under Rule 4(e) of the
Federal Rules of Civil Procedure, this is by no means the end of
the inquiry. It is well established that where federal courts
borrow and apply state law, they do so only to the extent that
the application of the state standard is not inconsistent with
federal law. See Johnson v. Railway Express Agency, Inc., 42i
U.S. 454, 462 (1975); Board of Regents v. Tomanio, 446 U.S. 478,
483-86 (1980).
In West v. Conrail, 481 U.S. 35, 39 (1987), the Supreme
Court held that where, in a federal question case, a court
borrows a state statute of limitations, it does not also borrow
the state's provisions with respect to when an action is
"commenced" even though those provisions may be part and parcel
of the borrowed statute. Because the federal rules already
establish a federal standard regarding the commencement of
actions, and because the application of the state rule would
conflict with that federal standard, the court rejected the
notion that the privisions of the borrowed statute of limitations
with respect to commencement of actions need be applied. Id. at .
39-40 and n.6.
It is thus clear that where a federal court borrows a state
law, that borrowed law does not supplant any existing federal
standard which might otherwise inhibit its application. Here,
the borrowing of the Texas long-arm statute does not extinguish
the application of the Supremacy Clause. Quite clearly, the
State of Texas cannot constitutionally condition the activities
of the federal government within its borders upon federal
employees being subject to suit there for those actions. That
the long-arm statute is being applied by a federal court does not
change that conclusion. (3)
Indeed, plaintiffs accept the notion that borrowed state law
remains subject to other federal constitutional limitations.
They concede that although Rule 4(e) borrows the relevant state's
long-arm statute, the application of the long arm statute remains
subject to the limitations which the due process clause imposes
upon state power. Opposition at 2-4. Just as the federal
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***FN 3 Defendants note that plaintiffs' characterization of
Martin v. Malhoyt, 830 F.2d 237 (D.C. Cir. 1987), as involving an
attempt to "sue or prosecute federal officials or agencies in
state court under state law" , opposition at 12, is simply wrong.
Martin was a suit alleging common law tort claims initiated in
the U.S. District Court for the District of Columbia against
federal employees. Id. at 244-45.
court's borrowing of the state long-arm statute remains subject
application of the state long arm statute in a f ederal question
case remains subject to the constitutional limitations upon state
power found in the Supremacy Clause. As the Supreme Court
recognized in World-Wide Volkswagen Corp. v. Woodson, 444 U.S.
286, 291 (1980),
[t]he concept of minimum contacts . . . can be seen to
perform two related, but distinguishable functions. It
protects the defendant against the burdens of
litigating in a distant or inconvenient forum. And it
acts to ensure that the States, through their courts,
do not reach out beyond the limits imposed on them by
their status as coequal sovereigns in a federal system.
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Thus, "'the reasonableness of asserting jurisdiction over the
defendant must be assessed in the context of our federal system
of government'". Id. at 293 (quoting International Shoe Co. v.
Washington, 326 U.S. 319, 317 (194S) ) .
Finally, this result finds support in the Rules Enabling
Act's injunction that the rules of procedure adopted by the
Supreme Court " shall not abridge, enlarge or modify any
substantive right." 28 U.S.C. Ą 2072(b) (1988). The right of
the federal government under the Supremacy Clause to exercise its
functions across state borders free from state interference
cannot be abridged by the incorporation of state long-arm
statutes into the Federal Rules of Civil Procedure.
Federal employees are charged with the responsibility of
implementing national programs and policies. Their actions
routinely affect individuals in every jurisdiction throughout the
country. Perhaps more than any other category of defendants,
they be must be shielded from personal capacity suits in foreign
jurisdictions with which they have no significant personal
contacts. Otherwise many federal employees will be distracted
from their official duties, to the detriment of the public good,
while they travel throughout the country defending civil suits
arising from their federal employment.
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CONCLUSION
For the reasons stated above, as well as in the motion to
dismiss of the individual defendants, plaintiff's claims against
those defendants must be dismissed for lack of in personam
jurisdiction.
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Respectfully submitted,
STUART M. GERSON
Assistant Attorney General
RONALD F. EDERER
United States Attorney
HELENE M. GOLDBERG
Director, Torts Branch
NICKI L. KOUTSIS
Assistant Director, Torts Branch